Fonterra, New Zealand’s largest milk supplier and dairy cooperative, says it is particularly disappointed by the new Dairy Export Incentive Program (DEIP) funding scheme, which follows a similar European strategy in returning to partly subsidised production.
However, it is the country’s rural lobby group Federated Farmers that was most scathing in its criticism of the US policy. The group accused President Obama’s government of acting along with Europe as ‘evil twins’ by reverting to subsidised protection of their farmers on the global market.
US support
The US Department of Agriculture (USDA), which is responsible for assigning allocation periods to subsidise US dairy exporters between July 2008 and June 2009, says that the DEIP remains within its commitments to market deregulation under World Trade Organization (WTO) agreements.
Agriculture Secretary Tom Vilsack states that the scheme was vital in supporting US dairy farmers in light of moves by the EU to reintroduce export refunds to its farmers as a temporary measure, despite pledges from both governments to move away from subsidised production altogether.
"These allocations illustrate our continued support for the US dairy industry, which has seen its international market shares erode, in part, due to the reintroduction of direct export subsidies by the European Union earlier this year," he states.
Vilsack denies that the measures amount to a complete reversal of US agreements under the WTO to move away from a protectionist stance in relation to its dairy farmers and their milk supply.
“Our measured response is fully consistent with our WTO commitments and we will make every attempt to minimize the impact on non-subsidizing foreign suppliers," he says.
Fonterra fears
Kelvin Wickham, managing director of global trade for Fonterra, criticised America’s stance on subsidies, claiming the DEIP could prove extremely damaging to the wider global dairy market for a ‘relatively small’ effect on US milk costs.
“Restarting of export refunds by the US sends a very negative signal to the market and the global community,” he says. “This is bad news for the market and bad news for our farmers in New Zealand who compete internationally with no support or subsidies of any type.”